Property Valuation
The principle of substitution states that:
AA property's value is determined by its highest and best use
BA buyer will pay no more for a property than the cost to acquire a substitute property with similar utility✓ Correct
CValue is created when a single use of land generates the most profit
DA property's value is the sum of the value of its individual components
Explanation
The principle of substitution holds that a rational buyer will pay no more for a property than the cost of acquiring a substitute property of equal utility and desirability. This principle is the foundation of both the sales comparison approach and the cost approach.
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